File picture: Henk Kruger/ANA/African News Agency.
File picture: Henk Kruger/ANA/African News Agency.

Small businesses to be hit hardest by rise in fuel costs

By Mercury Reporter Time of article published Oct 2, 2019

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Durban - Small businesses will be hardest hit in the wake of the recent fuel price hike. According to Inkatha Freedom Party spokesperson on Economic Development in KwaZulu-Natal, Otto Kunene, rising fuel prices are eroding the competitiveness of local businesses as they are adding to the cost of doing business in an already depressed economy.

At midnight on Tuesday, the price for 95 octane petrol has increase by at least 18 cents per litre and that for diesel by 25 cents per litre. The price for 93 octane petrol will decrease by 4 cents per litre. 

"We are worried that rising fuel costs will have a negative impact on SMEs since most micro enterprises are dependent on hired transport to fetch items from wholesalers and manufacturers. They must make a series of decisions to sustain their business models as fuel costs impact their supply and overhead expenses. This reduces the competitiveness of the smaller businesses. The rising business costs will likely lead to further retrenchments," he said. 

Kunene said this is a worrying factor considering that the economy has already experienced a number of workforce retrenchments in various sectors over the past months, adding to the already high levels of unemployment.

He said companies that are focused on delivery and transportation are often heavily impacted by the fuel price increases. 

"If they wish to save on fuel costs, they often must trim their geographic target service regions or find other ways to reduce costs in their existing service areas, by altering routes or driving practices. The increase in the price of fuel will also automatically reduce the purchasing power of the KZN citizens. It will increase their fears and deteriorate their health status," he said. 

Kunene said unauthorised petrol dealers also engage in reckless storage of this product in exposed tanks, drums and buckets roadside to extort money from members of the public. 

"This however has resulted in several economic losses, deepening underdevelopment and poverty in our society as in some cases, the exposed tanks get exploded into flames that have burnt people’s houses and vehicles and even loss of life in the process. In addition, commercial farmers, who rely on diesel for production of non-rain-fed crops, could be forced to scale down their farming activities, thus also putting pressure on food prices," he said. 

Kunene said they were aware that the hike in fuel prices is a bitter pill to swallow given the ripple effect it’s bound to have on the prices of goods and services. 

"We empathise with commuters and small and medium entrepreneurs just as we empathise with retailers, the manufacturing industry and the ordinary citizens. Sadly, the hike has been caused by a combination of both avoidable and unavoidable factors. The unavoidable external factors, which absolutely nobody in our nation has control of, includes the increase in crude oil prices in the global market," he said. 

According to the AA, the increase in fuel prices is linked to the mid-September drone attacks on the Abqaiq oil refinery in Saudi Arabia.

"The landed price of fuels in South Africa jumped by as much as a Rand a litre in just three days after the attack, before settling back slightly. This turned a generally stable price picture into a negative one," the AA said. 

The Mercury

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